Swiss Re has emphasised that digitalisation is a source of new growth and efficiencies for the insurance industry, but also considerable shifts in the risk landscape.
The reinsurance giant says in a new report that digital value creation has led to an increase of firms' intangible assets, including digital data.
At the same time, increased dependency on digital infrastructure makes such assets more vulnerable, for example to business interruption and cyberattacks.
In the report, Swiss Re Institute introduces the Insurance Digitalisation Index, which tracks the progress made in twenty-nine countries with respect to the digitalisation of their insurance markets. South Korea came out on top of the index, followed by Sweden, Finland, and the US.
The Swiss Re Institute said that while advanced markets with strong physical infrastructure and high internet access rates have made most progress in digitalising their economies, China, Slovenia, and India are catching up.
China, for example, has moved up by ten places in just ten years. It said that this is because emerging markets can jump straight into adopting newer digital technologies rather than transitioning from legacy systems.
The firm also comments in its latest so-called Sigma study, “The Economics of Digitalisation in Insurance”, that the potential benefits across countries and throughout the insurance value chain are far from exhausted.
It said that digitalisation of the wider economy will also create new risk pools, opening up opportunities for insurers. It pointed to digital technology, which it said has facilitated sharing-economy business models, which have resulted in fundamental shifts in operational risks and liabilities that require innovative insurance risk transfer solutions.
The Swiss Re Institute also pointed to sharing services like Uber and Airbnb are increasingly replacing private ownership. This requires a shift in business mix from personal to commercial lines based on usage, as personal lines typically exclude cover for commercial usage of vehicles and homes. Insurers can help achieve such coverage through innovative digital risk transfer solutions.